Wednesday, January 30, 2008

Ready or Not, Digital Broadcasting is Almost Here

Under the Digital Television Transition and Public Safety Act of 2005, Congress mandated that all full-power television broadcast stations stop broadcasting in analog format and broadcast only in digital after February 17, 2009.1 While it is somewhat unusual for Congress to mandate an upgrade in technology for consumers rather then letting the technology market drive itself, there are a couple of motives here that make the situation different from, for instance, a mandate to upgrade from VHS to DVD. First, the changeover will free up frequencies for public safety communications (such as police, fire, and emergency rescue).2 Second, the 700 megahertz band is in the process of being auctioned off to companies for advancing commercial wireless services for consumers.3 While these outcomes will be beneficial for society, the pragmatic challenges of the changeover are causing skeptics to question the implementation of the digital transition.

Feasibility of the Transition

One question that consumer advocates are raising is the feasibility of the conversion, both because of the number of consumers who must take action to continue receiving broadcasts and the technological subject matter. While cable and satellite customers might have to make changes to their service or equipment, the group most affected by the transition is television viewers who don’t subscribe to cable or satellite and have an analog television. These viewers must obtain a digital-to-analog converter in order to continue viewing programming, and will otherwise be receiving all static beginning next February. Nielsen estimates that 13% of American households, or approximately 14.3 million households, watch television via an over-the-air signal only and thus must install a converter if they want to continue viewing.4 As of November, only 31% of this group was aware of the upcoming transition.5 While these statistics are grim, there is hope that the FCC will be able to pull together an effective strategy to make this transition painless.

First, the FCC has an incredibly effective tool for creating notice and explaining the transition—television commercials! Running commercials on non-cable stations is an obvious and likely effective way of reaching the targeted group. The FCC has also set up an informative, albeit busy, website, www.dtv.gov (with a considerably ominous countdown-to-DTV-transition clock), that explains the transition and links to another, more straightforward, website run by the National Telecommunications and Information Administration that allows consumers to obtain up to two coupons worth $40 each for digital-to-analog converter boxes.6

The demographics of the most-affected group also encourage the hope that the transition will be successful. The primary households affected are young—35% are aged 18-34, and household education levels are similar to those of the overall U.S. population.7 Only 16% of these households are over the age of 55,8 and thus most are in a good position to be familiar enough with technology to understand the digital transition and make the straightforward installation of the converter box. For those who don’t have internet access, the FCC is also prepared to answer inquiries about the transition over the phone or through traditional mail.9

For those skeptics who still think that the transition’s current timeframe is unreasonable,10 a good analogy would be to the Medicare Part D sign-up that took place in 2005-2006. The Medicare sign-up was also a government-organized alteration of the system where beneficiaries had to take action by a deadline in order to continue receiving a benefit. In the six-month enrollment period for the prescription-coverage program, 29million beneficiaries signed up for the program, leaving only 4.5 million left without a known source of coverage.11 This is an 87% success rate for a program that by most accounts was terribly confusing and inadequately implemented. The digital transition is arguably more straightforward than the Medicare sign-up, as there aren’t options to choose from, but rather a single solution (a converter box) for analog televisions that aren’t hooked up to cable/satellite. Furthermore, most Medicare participants (87%)are senior citizens aged 65 and older12, only 32% of whom had internet access to research their options.13 Comparatively, 71% of all adults have internet access where they can access digital transition information.14

Objections to the Coupon Program

In addition to general concerns over the feasibility of the transition, the coupon program to subsidize the purchase of converter boxes has generated its own negative exposure for a couple of reasons. First, there is concern that there will not be enough coupons for everyone who requires one.15 Second, conservative groups such as The Heritage Foundation argue against the use of government funds to support the coupons at all.16

This second objection can be dismissed relatively easily. The argument is that since there is no“right to television,”17 Congress should not have authorized $1.5 billion18 to implement the coupon program.This subsidy argument is misleading, however. The Commerce Department must reimburse the Treasury for the coupon program with a nearly $7.4 billion deposit using the proceeds from the 700 megahertz band auction, so the government is not taking a loss with the coupon program.19 The rest of the auction proceeds are going towards other programs, including the communications systems for public safety mentioned above.20 Perhaps some will argue that all proceeds of the auction should go to the Treasury without paying for the coupon program, but the coupon seems to be a reasonable compensation for consumers who are in an exceptional position of being forced to upgrade their technology.

The more significant concern is whether there will be enough coupons and converters for each analog television that is currently relying on over-the-air transmission. The Commerce Department has determined that it will have enough funding to issue 33.5 million coupons21 and can issue up to 2 coupons per household.22 In addition to the estimated 14.3 million households receiving only over-the-air broadcasting, there are 23.9 million more households that have at least one analog television not connected to their satellite or cable service.23 While some of these households use their analog televisions only for video games or DVDs, there may end up being more analog televisions that need conversion than there are coupons. Since the level of awareness about the digital transition is so low at this point,it is difficult to estimate how consumers will react. Demand for the coupons will also be affected by the number of consumers who will take this as an opportunity to upgrade to either a new digital-compatible television or to a cable or satellite service. As of January 18th, 3.4 million coupons have already been requested.24 While the Commerce Department encouraged retailers to be prepared to redeem the coupons for the converter boxes starting, January 1, 200825 it doesn’t seem that many have met that goal. I performed test searches from the coupon application website26for local retailers who are selling the converters in various locales and came up with very few results.

3 Comments:

Anonymous said...

Great article, It answered all of my questions that I have had about DTV so far. It seems odd that the act was passed in 2005, yet the first comercial I have seen for DTV was in 2008. Keep up the good work!

There's a federal government website www.dtv2009.gov for information regarding to TV converter box coupon program, or call 1-888-DTV-2009. The coupons must be used within 90 days of the date on which they are mailed to the consumer. Converter boxes aren't necessary for TV sets containing digital tuners. The tuners have been included in TV sets sold in the US since 2004 even if they aren't high definition TVs.